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“Rated” advisors shall incorporate asset protection planning into the advice given to all clients.”

Instead of trying to write in paragraph form how an attorney can breach the SOC, we will simply list some examples which will make is self evident.

The standard will vary depending on the “Rating” of the advisor. The better an advisors “rating,” the higher standard they shall have to live up to.

Example 1: A typical small business client.

Mr. Green, age 45, had his estate plan done by a local law firm. Mr. Green disclosed that he is married, has two minor children and has the following assets:

-a $150,000 brokerage account
-an office building he works out of with a value of $300,000 with little debt
-$75,000 in a variable life policy
-a personal residence worth $400,000 with $200,000 of debt

He earns $250,000 a year and lives in a state with no homestead exemption.

In his business is a sole proprietorship. He has seven (7) employees and provides to them a fully insured health plan with BCBS and a Simplified Employee Pension (SEP). The cost of the health insurance is $500 per employee and $850 for a family plan.

The typical local CPA/Accountant/EA will not get involved in the client’s estate plan. They will typically answer questions the client has after the client goes and sees the attorney. Not terribly helpful.

The typical CPA/Accountant/EA will take care of the client’s personal and corporate tax returns however. What advice is typically given in this review?

Not too much.

Mr. Green is told to stay a sole proprietorship because it is simple and inexpensive. He is told to keep the SEP-IRA because it is simple and inexpensive to administer. Basically the CPA/Accountant/EA simply calculates the taxes due by Mr. Green for the prior year.

Will such advice meet the SOC of the APS™? No.

What advice should have been given in addition to the standard advice?

1) Mr. Green must be told to immediately change from a sole proprietorship (SP) to some kind of entity. An LLC is usually preferable. A SP provides NO protection from the work done by the SP. Additionally, there are several tax reasons to have an entity treated as an S-Corporation or even a C-Corporation in some instances.

2) The building used by the business is exposed to lawsuits and creates liability which exposes the rest of Mr. Green’s estate to creditors. The property should be protected from other creditors and insulated so it doesn’t cause liability to the rest of Mr. Green’s estate.

3) The business should get rid of the SEP-IRA and use a 401(k)/profit sharing plan. A SEP-IRA immediately vests employees and Eligible employees include anyone who earns more than $450 and has had any service in three of the past five years. This is the least discriminatory plan available for Mr. Green and therefore what he saves in minor administrative fees he spends many times over with contributions which immediately vest for the employees. Additionally, there is no discrimination in a SEP-IRA when it comes to the amount of contributions. If Mr. Green contributes 10% of pay for himself, he must contribute 10% of pay for all the employees.

4) The business should get rid of the fully insured BCBS health insurance plan and instead implement a high deductible health insurance plan coupled with a Health Savings Account. This will save Mr. Green significant money on an annual basis and the plan will provide for first dollar health care cost of his employees.

5) Mr. Green’s brokerage account is subject to creditors. It needs to immediately be asset protected.

6) The home’s equity is not protected. The client should be made aware of the various ways to protect the home from creditors (debt shield, IDGT, etc).

If the CPA/accountant/EA has a “G” (Global) rating, he would also want to address the problems with Mr. Green’s life insurance policy, the fact that he is under insured, and the fact that he has not funded for the nearly guaranteed long-term care expenses he will have in retirement plan.

Summary

Providing quality advice to clients on asset protection is not difficult. If you surf this website, you will find out for yourself that there is nothing inherently difficult about asset protection planning.

“Rated” advisors have proved to the APS™ before becoming “Rated” that they have the requisite knowledge and under the “Standard of Care” put forth by the Society, “Rated” advisors have a duty to use this knowledge to help their clients.

This again, is the reason the APS™ was created. To protect the public and to point out them those advisors who truly can help them implement a comprehensive and complete asset protection plan.